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Fairway is saving time and money with property inspection waivers

It’s no secret that appraisers are in high demand — especially in rural areas and during peak home-buying season. In some cases, this can slow down closings and potentially drive up loan costs with longer initial interest-rate locks or for lock extensions.

PIWs are part of Fannie Mae’s Day 1 Certainty™ initiative. Day 1 Certainty streamlines key aspects of the mortgage origination process. A property inspection waiver (PIW) is an offer to waive the appraisal for certain refinance transactions.

Fannie Mae issues PIW offers through Desktop Underwriter® (DU®) using its database of more than 24 million appraisal reports in combination with proprietary analytics from Collateral Underwriter® (CU™) to determine the minimum level of property valuation Fannie Mae requires for loan deliveries.

How It WorksTo issue a PIW, there must be a prior appraisal for the property in CU. The appraisal must be associated with one of the borrowers on the loan case file. There may be situations where additional eligibility criteria apply. For example, a property located in an area where a recent disaster has occurred should always have an appraisal.

When a loan is eligible for a PIW and the lender exercises the waiver, Fannie Mae accepts the value estimate the lender submits as the value for the subject property. The lender’s or the borrower’s estimate of the value may be the basis for the property value the lender enters in DU. Or lenders may determine the property value at their discretion.

DU issues PIW offers on about 20 percent of limited cash-out mortgage refinance transactions. If all eligibility requirements are met, the lender is able to expedite the refinance while also receiving protection from representations and warranties on property value, condition, and marketability.

PIW offers will be considered on one-unit properties — including condos, principal residences, second homes, and investment properties. Certain property and loan types don’t qualify. Lenders can go to the Fannie Mae website for more information.

More Efficient Appraisal ManagementMore than 70 percent of Fairway’s business involves purchase originations. The enhanced PIW means Fairway needs fewer appraisals on the refinance side of its business. This enables the lender to more efficiently schedule appraisals on the purchase side.

“With PIWs, we were able to process the purchase appraisals faster because there were fewer refinance appraisals being requested,” Fletcher says of Fairway’s experience during the pilot phase. “We saw a return of the waiver right where Fannie Mae said it would be,” he adds.

That certainty enabled Fairway to build file-flow instructions on how to originate, process, and deliver loans to Fannie Mae with added certainty, he says.

Kevin Fox, technology delivery manager for Fannie Mae, says that a PIW allows lenders to close on loans more quickly while also reducing expenses.

“Lenders and borrowers will see reduced costs in those instances where an appraisal is no longer required,” Fox says.

Improving Productivity with PIWUnderwriting the appraisal and overall mortgage underwriting are among the costliest and most time-consuming parts of loan production, says Aiman Beg, technology business development manager, customer engagement, at Fannie Mae.

“The PIW should improve the productivity of the underwriters while reducing the costs associated with producing the mortgage,” he says.

Besides saving costs when appraisals are not required on certain refinances, lenders and borrowers save from reduced cycle times, Fox adds. “You can get a shorter lock for your borrower, which is a reduced fee. So you are saving two ways with a PIW,” he says.

Fairway’s Fletcher estimates the company is closing four to five days faster on loans that receive a PIW. And shorter interest-rate locks translate into savings for their borrowers.

“If you do a 30-day lock and have to extend it 15 days, the cost to extend can range from 12 basis points to 20 basis points, depending on the loan product,” he says. “That cost is borne by the lender or passed through to the consumer. If you can do shorter locks, that is a less expensive loan to the lender. Which means the lender can pass along those savings to the consumer.”

Fletcher said Fairway expects to close nearly all refinances receiving a PIW within 30 days. Many should close within 20 days.